How Simple Can You Get?

Successful retirement investing can be simple. Really simple.

Do you find stock investing complicated? Time-consuming? Not worth the bother?

Do you find the world of mutual funds bewildering, with too many choices, too many outrageous claims, and too many big fees for iffy performance?

If you're here reading this, odds are that those statements don't describe you. But they might describe someone you know, a friend or relative, someone you've tried to help.

Some people just don't want to learn about investing. They find the numbers daunting, they've waited too long and don't want to face up to the problem, or they're worried they won't be good at it so they don't bother trying.

On some level, that's not a big deal. For some, stock investing is a hobby. People have other hobbies.

But in a world where your life after retirement depends on how well you invest now, some basic knowledge is critical. Really basic knowledge, like "Save for retirement!"

I'm not joking. Only about 63% of eligible employees participate in the average workplace savings plan, according to Fidelity Investments. Think those folks have big fat IRAs instead?

Think again.

I used to work for a big 401(k) provider, and part of my job involved consulting to huge companies, helping them figure out how to increase their participation rates and get those new participants engaged. It's very difficult to do. When we succeeded, it was usually for one (or both) of two reasons:

The genius of simplicityBerkshire Hathaway(NYSE:BRK-B) CEO and investor extraordinaire Warren Buffett has been quoted as saying that simplicity is the highest level of genius. Certainly his investing career -- built on huge profits from investments in simple businesses -- reflects the genius of simplicity.

I am a firm believer that, for most people, simplicity is the key to retirement investing success. Wall Street makes a lot of money by offering us ever-more-complicated products and strategies, each one accompanied by breathless media stories and marketing messages assuring us that this product meets an essential need.

More often than not, that need is Wall Street's need for more fees -- and our need to feel like we're getting some sort of special advantage. We hear friends' stories about tripling their money with stocks like Contango Oil & Gas(NYSE:MCF) or Marvel Entertainment(NYSE:MVL) or Baidu.com(NASDAQ:BIDU), and we want some of that glory too.

Of course, what our friends -- and the pros -- don't brag about is that for every success like Baidu, they also bought some stocks that fell on hard times, like Openwave Systems(NASDAQ:OPWV) or Washington Mutual(NYSE:WM). Or fuel cell maker Hydrogenics(NASDAQ:HYGS), which left me with a 50% loss a while back.

The truth is, you can beat the majority of the Wall Street pros with some very simple thinking. Odds are, you already have the tools you need to do it in your 401(k) or 403(b) plan at work.

Simplicity in practice

By now, you've probably figured out that I'm going to recommend index funds. And I am -- with low-cost index funds, you can achieve market-rate returns year-in and year-out without having to think about it.

Sure, buying an index means you'll own the losers as well as the winners. But even experts end up owning plenty of losers -- a very famous portfolio manager once told me he was lucky if half his stocks ended up making him money over time. The trick to his success was that his good picks were really good and his bad ones not too awful -- but you've got to be an expert to do that consistently, and you've got to put in some really long hours.

That's the hard way to do it. Buying the index fund? Simple.

Putting all your money in one broad market index fund is the simplest way to go. But you'll improve your returns and lower your risk if you own a few different types of index funds, and allocate your assets among them in a way that makes sense with your goals and time horizon.

That may sound a little less simple, but it doesn't have to be.

The Fool's Rule Your Retirement newsletter maintains a set of asset allocation models -- little maps, basically -- that show you exactly how much of what kinds of funds to buy. They were just revised last month, they're based on the best research available, and they're really simple to use.

They come with complete instructions that'll do everything but hold your hand -- and if you have any questions, just ask. Simple.